Maryland State Retirement & Pension System, Baltimore, committed $165 million to private equity funds and $75 million to real estate in October and November, according to the $45.8 billion fund's latest investment report.
Maryland committed $90 million to Bain Capital Asia Fund III, a targeted $2.5 billion buyout strategy managed by Bain Capital Partners that is expected to invest in middle-market companies primarily based in China, Japan, India and Australia. Frazier Healthcare Partners received a $50 million commitment for its Frazier Healthcare Growth Buyout Fund VIII and $25 million for Frazier Life Sciences VIII, which invests in companies developing novel therapeutics.
FCP Realty Fund III, managed by Federal Capital Partners, received a commitment of $75 million. Federal Capital Partners invests in the mid-Atlantic region and the Carolinas.
The pension fund has a 10% target allocation to private equity and an 8.6% current allocation, as of Oct. 31. The real estate target is 10% target, and a 7.9% actual allocation.
Also, earlier this year, investment consultant Meketa Investment Group conducted a high-level review of Maryland's management fee schedules, and offered some possible scenarios for reducing fees.
In a memo prepared for the Nov. 13 investment committee meeting, Chief Investment Officer Andrew Palmer noted Meketa highlighted area for reduced fees “is the increased use of passive strategies in asset classes where alpha is difficult to achieve, or the level of outperformance due to manager selection is modest,” including core fixed income and inflation-linked bonds. While staff agreed with that, Mr. Palmer said in the memo that due to significant and persistent net long-term outperformance by active core fixed-income managers, “staff is confident that active management is warranted,” while TIPS exposure will be managed passively in the future.
Meketa also recommended taking advantage of fee breaks based on the portfolio's asset size. Investment staff is negotiating with one manager on fees, Mr. Palmer said in the memo. He did not name the manager.
